Finance in an Age of Austerity

Finance in an Age of Austerity

The Power of Customer-owned Banks

Johnston Birchall

This is a book in search of an alternative to the discredited investor-owned banks that have brought the rich countries into crisis and the world economy into a long period of austerity. It finds customer-owned banks – credit unions, co-operative banks, building societies – have hardly been affected by the crisis and continue to operate according to their organisational DNA: low-risk, close to the customer, underpinned by real savings, and still lending to SMEs to protect jobs and local economies. They are big business – in some countries with over 40% of the market – but networked in smaller, democratic societies whose origins go back to 1850s Germany.

Chapter 1: Introduction

Johnston Birchall

Subjects: business and management, corporate governance, social entrepreneurship, development studies, social entrepreneurship, economics and finance, corporate governance, money and banking, politics and public policy, social entrepreneurship

Extract

Books do not usually start with an appendix, but perversely this one does. The appendix provides a rather dull explanation of all the different terms used to describe the alternative to the ‘capitalist’ banks that have let us down so badly over the last few years. The problem is that we have become so conditioned to seeing investor-owned banks as the norm that when we try to describe an alternative words fail us; we do not know how to describe it. This book will show that there is an alternative banking system that has a long and distinguished history, and in many countries already is a serious competitor to other kinds of banks. However, because of historical accidents and misunderstandings it now comes in several guises: cooperative banks, credit unions, savings and credit cooperatives, building societies, mutual savings and loans, and so on. In order to see the alternative we first have to name it. We need an umbrella term, and so this book is about customer-owned banks. The idea of customer-ownership is simple. Some banks avoid the need for a group of investors who take ownership rights over the business. They turn their customers into owners instead. There are all sorts of consequences to this decision that will be explored in the book.